KSA Civil Transaction Law
Rajeshkumar Rajendran LLM LLB BE MRICS MCIArb
A senior leader with an impressive background in Commercial, Contracts, & Claims Management, overseeing multimillion-dollar projects. With two decades of experience, the majority gained in Dubai, Qatar & Saudi Arabia.
The introduction to the Civil Transactions Law marks a significant shift in Saudi Arabia’s legal landscape, transitioning from a system primarily based on Shariah interpretations to a codified legal framework. This change is positioned as a step toward modernizing the Kingdom’s legal system while maintaining adherence to Islamic principles. The document highlights the law’s aim to enhance business confidence, facilitate investments, and provide legal certainty. This is a commendable step, as legal predictability is crucial for both domestic and international businesses. The reference to the Egyptian Civil Code as an influential precedent suggests an effort to align Saudi Arabia’s legal system with established regional frameworks, potentially fostering greater cross-border legal coherence.
However, the retroactive application of the law is a point of concern. While the law applies to past contracts and events, exceptions exist when legislative texts or judicial principles contradict its terms, or when limitation periods began before the law's enactment. This selective retroactivity could create uncertainty for businesses, as it leaves room for interpretation and possible legal disputes over which principles apply. Such ambiguity might counteract the intended predictability that the law seeks to provide.
The document also discusses the broader regulatory implications of the Civil Transactions Law, requiring authorities to review and align existing laws with the new code. While this ensures consistency, the tight deadline for compliance raises questions about the feasibility of implementing such extensive legal reforms without disruptions. Companies are advised to reassess their contracts, but the document does not fully explore the potential challenges businesses may face in adapting to these changes, such as legal costs or transitional conflicts.
Overall, while the Civil Transactions Law represents a progressive step in legal codification and business facilitation, its retroactivity, the need for extensive legislative alignment, and the potential costs of adaptation warrant further scrutiny. The law’s effectiveness will largely depend on how well the judiciary and regulatory bodies manage these transitions and interpretations.
Contracts, unilateral acts, harmful acts, unjust enrichment, and statutory obligations
The sources of obligations under the newly enacted Saudi Civil Transactions Law, identifying five key categories: contracts, unilateral acts, harmful acts, unjust enrichment, and statutory obligations. This structured approach represents a significant advancement in Saudi Arabia’s legal framework, offering greater clarity and predictability compared to the previous system, which relied primarily on Shariah principles interpreted by judges. By codifying these sources of obligations, the law aims to bring consistency to legal rulings and align with international best practices while maintaining adherence to Islamic jurisprudence.
The section on contracts underscores their foundational role in creating legal obligations, emphasizing principles of mutual consent, legal intention, and enforceability. The Civil Transactions Law draws heavily from regional civil codes, such as those in Egypt and the UAE, fostering a more standardized legal environment across the MENA region. However, while the alignment with regional legal traditions enhances coherence, the document does not explore potential conflicts that may arise when international businesses operating under common law principles engage with the Saudi system. The flexibility offered in contract formalities is a strength, as it allows for both written and verbal agreements, but it also raises concerns regarding enforceability and evidentiary challenges in disputes involving oral contracts.
The treatment of unilateral acts is notable as it extends obligations beyond mutual agreements, enforcing commitments made independently. While this principle aligns with Islamic legal concepts like Ja’alah, its application in commercial settings could introduce uncertainty, particularly where businesses or individuals make informal commitments that later become legally binding. The law attempts to mitigate this risk by requiring specific conditions for enforceability, yet there remains a potential for disputes over interpretation, particularly in cross-border transactions where legal traditions differ.
Liability arising from harmful acts (tort law) is addressed comprehensively, covering personal liability, third-party liability, and harm caused by objects or property. This expansion is crucial for modern legal systems, particularly in the context of corporate responsibility and employer liability. The codification of liability principles ensures that companies and individuals are held accountable for negligent or harmful actions, which could enhance consumer and investor confidence. However, the document does not sufficiently discuss how the new provisions might impact insurance and risk management practices in Saudi Arabia, which could see significant shifts as businesses adapt to clearer liability rules.
Unjust enrichment is another key area, reinforcing the obligation to compensate individuals who suffer losses due to another party’s unfair gain. The explicit conditions outlined in the Civil Transactions Law enhance legal certainty by defining enrichment, loss, and the absence of a legal basis as essential criteria for claims. However, the broad application of this principle may lead to increased litigation, particularly in commercial disputes where one party perceives an unfair financial advantage. Additionally, the document does not address whether exceptions exist for certain commercial transactions where enrichment might be a byproduct of legitimate competitive practices.
The final category, statutory obligations, formalizes the role of enacted laws as a source of legal duties. This codification aligns Saudi law with global legal frameworks, ensuring that obligations imposed by regulation are enforceable and not merely recommendations. The document highlights areas such as tax, labor laws, and environmental regulations as examples, reflecting the growing complexity of the Kingdom’s legal infrastructure. However, there is limited discussion on how the new legal framework will interact with sector-specific regulations, potentially leading to transitional legal uncertainties.
Overall, it present a well-structured overview of the key sources of obligations under the Civil Transactions Law, marking a major step toward legal modernization in Saudi Arabia. While the codification improves legal predictability and aligns with international norms, its implementation will require careful judicial interpretation to balance the preservation of Shariah principles with the evolving demands of a globalized economy. Moreover, businesses and legal practitioners will need time to adapt to the structured framework, which, despite its benefits, introduces new complexities in contractual, tortious, and regulatory obligations.
THE MAXIMS
The document introduce and analyze the Islamic legal maxims ("Maxims") incorporated into the Saudi Civil Transactions Law, highlighting their significance in shaping the interpretation and application of legal principles. These maxims serve as foundational guidelines that influence judicial decision-making and contract enforcement. While the document presents these maxims as a critical tool for enhancing legal certainty, it does not sufficiently explore the challenges that might arise in their practical application, especially when balancing Shariah-based principles with modern commercial realities.
One of the strengths of this section is its emphasis on the alignment of these maxims with regional legal frameworks, particularly in countries like the UAE. By integrating well-established Islamic legal principles with contemporary legal needs, the Civil Transactions Law seeks to create a structured and predictable legal environment. However, the document does not address the potential conflicts that may arise when these maxims are applied in business dealings involving foreign entities unfamiliar with Shariah-based legal reasoning. For instance, concepts like “intentions take precedence over words” may clash with contractual norms in common law jurisdictions, where the written contract is often considered the definitive source of obligations.
Several key maxims discussed in the document, such as “matters are to be considered in light of their objectives” and “intentions take precedence over words and form,” emphasize the importance of substance over form in legal interpretation. While this approach provides flexibility and aligns with Islamic jurisprudence, it could lead to subjective judicial rulings, particularly in commercial disputes. The document does not explore how courts will balance these maxims with the need for objective and predictable contract enforcement. For instance, while prioritizing business intentions may ensure fairness, it may also create uncertainty for parties who rely on strict textual interpretations of agreements.
The inclusion of the maxim that “customary practices are as binding as explicit stipulations” is particularly noteworthy, as it acknowledges the importance of business customs in shaping contractual obligations. This is a pragmatic inclusion that recognizes the role of industry norms in commercial dealings. However, the document does not sufficiently discuss how these customs will be defined and interpreted by the courts, especially in sectors where practices vary significantly. The potential for inconsistent application across different industries remains a concern.
Another crucial maxim discussed is the principle that “silence can imply acceptance in certain contexts.” While this principle may have a basis in Islamic law and regional civil codes, it raises concerns in contractual dealings, particularly in cross-border transactions. In many legal systems, explicit consent is required for contractual obligations to arise. The document does not address how this principle might affect businesses dealing with international partners who may not be aware that inaction could be construed as agreement.
The discussion on the maxim that “harm shall be remedied” underscores the Civil Transactions Law’s emphasis on protecting the rights of aggrieved parties. This aligns with the law’s broader goal of enhancing legal protections and business confidence. However, the related principle that “harm should not be remedied with similar harm” suggests a reluctance to enforce punitive measures, which may limit the effectiveness of deterrents against contractual breaches or misconduct. The document does not examine whether this approach might weaken enforcement mechanisms in cases of significant breaches.
The maxim that “preventing harm is prioritized over pursuing benefit” introduces a risk-averse approach to legal interpretation, potentially influencing business regulations and dispute resolution. While prioritizing risk mitigation is essential, an overly cautious application of this principle may hinder economic activity by discouraging innovation and calculated risk-taking. The document does not discuss how this principle will be balanced against the need for economic growth and business expansion.
Overall, while the discussion on legal maxims highlights the Civil Transactions Law’s effort to codify and standardize Islamic legal principles, the document does not fully address the challenges of integrating these maxims into a modern legal framework. The reliance on interpretive principles rather than rigid legal provisions introduces flexibility but also raises concerns about judicial discretion and predictability. Additionally, the impact of these maxims on foreign investment and international business relations remains an open question. As Saudi Arabia continues to reform its legal landscape, the successful implementation of these maxims will depend on how well they are reconciled with commercial realities and the expectations of a globalized business environment.
GOOD FAITH
The document focus on the principle of good faith in negotiations under the Saudi Civil Transactions Law, particularly as outlined in Article 41. This provision marks a significant development in Saudi contract law by explicitly codifying the obligation to negotiate in good faith, a concept deeply embedded in civil law traditions but historically less emphasized in Shariah-based and common law systems. The analysis provided in the document presents this legal development as a progressive step toward fostering transparency and fairness in contractual dealings. However, it does not fully explore the practical challenges businesses may face in complying with and enforcing this obligation.
One of the key strengths of Article 41 is its attempt to impose accountability during the pre-contractual phase, ensuring that parties engage in negotiations with sincerity and do not engage in deceptive practices. By defining bad faith as a lack of seriousness in negotiations or the deliberate failure to disclose material information, the law provides a clear standard for evaluating misconduct. This is a positive step toward creating a more structured and predictable business environment. However, the document does not sufficiently address how courts will determine whether a party has acted in bad faith. Proving that a party lacked seriousness in negotiations or deliberately withheld information could be highly subjective, leading to legal uncertainty and potential abuse of claims.
The law’s approach to pre-contractual liability aligns with international best practices, particularly in civil law jurisdictions where negotiating parties have a duty to act in good faith. However, the document does not analyze how this principle will interact with existing Saudi legal traditions. Historically, Saudi contract law was primarily governed by Shariah principles, which emphasize mutual consent and fairness but do not always impose strict pre-contractual obligations. The introduction of liability for bad faith negotiations could represent a cultural and legal shift, potentially increasing litigation risks for businesses accustomed to a more flexible negotiation process.
Another notable aspect of Article 41 is that it explicitly limits compensation for bad faith negotiations to actual damages, excluding loss of expected profits. This restriction is consistent with the general approach in civil law jurisdictions, where reliance damages (such as wasted negotiation costs) are recoverable, but expectation damages (such as lost business opportunities) are not. While this limitation helps prevent speculative claims, it may also reduce the deterrent effect of the provision. Businesses engaging in negotiations with stronger bargaining power might still exploit weaker parties by negotiating in bad faith, knowing that their liability is capped. The document does not discuss whether additional safeguards, such as stricter disclosure requirements or penalties for repeated violations, could be introduced to strengthen the law’s enforcement.
Furthermore, the expansion of bad faith beyond deliberate misconduct to include any violation of the good faith principle introduces a broad and potentially ambiguous standard. While this reflects a commitment to ethical business practices, it also raises concerns about the potential for excessive litigation. The document does not address whether Saudi courts have developed sufficient jurisprudence to interpret and apply this standard consistently. In the absence of well-established case law, businesses may struggle to predict how courts will rule on bad faith claims, leading to increased legal uncertainty.
The document also highlights the broader implications of Article 41 for procurement and tendering processes, suggesting that misleading pre-tender materials or predetermined outcomes could now be challenged under the new law. This is a crucial point, as it signals a shift toward greater transparency in public and private sector procurement. However, the document does not explore how this provision will be enforced in practice. Will parties be required to disclose internal decision-making processes to prove the sincerity of their negotiations? How will the law apply to multinational corporations operating in Saudi Arabia, where negotiation practices may differ? These unanswered questions highlight the need for further clarification and judicial guidance.
Overall, while Article 41 represents a significant step toward modernizing Saudi contract law and enhancing business transparency, its practical implementation remains uncertain. The broad definition of bad faith, the potential for subjective judicial interpretations, and the limitation on damages all raise questions about how effective the provision will be in practice. The document presents the law as a necessary reform but does not sufficiently critique its potential shortcomings or suggest ways to mitigate the risks of ambiguity and litigation abuse. Moving forward, clear judicial interpretations and potential regulatory guidance will be essential to ensure that the principle of good faith negotiations is applied consistently and fairly across different business sectors.
MUQAWALA
The document discuss the concept of Muqawala (contracting) under the Saudi Civil Transactions Law, a key area that governs construction and service contracts. The document emphasizes the relevance of these provisions, particularly given Saudi Arabia’s ambitious infrastructure and development projects under Vision 2030. While the codification of Muqawala principles brings much-needed clarity and structure to contractual engagements, several critical issues arise concerning enforceability, contractor obligations, and the law’s alignment with regional and international construction norms.
One of the most notable strengths of the Muqawala provisions is their effort to create a structured legal framework for contractor and employer relationships, addressing key concerns such as contract performance, adjustments, liabilities, and termination. By codifying these obligations, the law reduces reliance on judicial discretion and ensures that disputes are resolved within a defined legal framework. This is particularly important in large-scale construction projects, where clarity in contract terms helps mitigate disputes and enhances investor confidence. However, while the document acknowledges the benefits of legal certainty, it does not discuss how the new law will interact with existing procurement regulations and government contracts, which have historically been governed by separate legislative frameworks.
A key provision highlighted in the document is Article 461, which defines a Muqawala contract as an agreement where a contractor undertakes to manufacture a thing or perform a specific task without being under the direct authority of the employer. This definition is significant because it clearly distinguishes Muqawala contracts from employment contracts, ensuring that contractors remain independent entities rather than employees. However, the document does not explore potential ambiguities in this distinction, especially concerning subcontractors, who may operate in a legal gray area between contractual independence and employer control. This issue is particularly relevant given the prevalence of subcontracting in large construction projects, where layers of agreements can create uncertainty regarding liability and obligations.
The discussion of contractor obligations under Articles 465 and 466 is another important aspect of the law. These provisions mandate strict adherence to contract terms and timelines, reinforcing accountability in construction and service agreements. Additionally, they provide mechanisms for corrective actions, allowing employers to demand performance or rectify defects at the contractor’s expense. While these provisions enhance contract enforcement and quality control, the document does not consider potential practical challenges, such as delays caused by unforeseen circumstances (e.g., supply chain disruptions, regulatory changes, or force majeure events). In the absence of clear provisions addressing these external factors, contractors may bear disproportionate liability for project delays beyond their control.
The Muqawala section also introduces rules on contract adjustments, particularly regarding cost overruns and design changes (Articles 470 and 471). This is a crucial addition, as construction projects often undergo modifications due to changing specifications, regulatory approvals, or unforeseen site conditions. The document correctly highlights the importance of these provisions in ensuring fairness and flexibility. However, it does not analyze whether the law sufficiently protects contractors from unilateral design changes imposed by employers, which could lead to financial strain and operational difficulties. The extent to which contractors can renegotiate compensation for additional work remains unclear, posing a risk for construction firms operating in the Saudi market.
Another critical issue raised in the document is the treatment of subcontractors, particularly under Article 473, which holds the main contractor responsible for the actions of subcontractors. While this aligns with international construction practices, it raises concerns about risk allocation in multi-tiered contracting structures. The document does not explore whether subcontractors have direct recourse against project owners in cases where main contractors default on payments. This issue is particularly relevant given the challenges faced by smaller subcontractors, who often struggle with delayed payments in large-scale projects.
The comparison of the Saudi Civil Transactions Law with regional legal frameworks, particularly in Egypt, the UAE, Jordan, and Iraq, highlights both similarities and key differences. One significant omission in the Saudi law is the lack of a decennial liability provision, a legal principle present in Egyptian and other regional laws that holds architects, engineers, and contractors liable for structural defects for ten years after a project's completion. The absence of this provision in the Civil Transactions Law means that liability for construction defects may be subject to general contractual principles rather than a strict statutory framework. However, as noted in the document, the Saudi Building Code’s implementing regulations contain similar provisions, creating a potential overlap or conflict between different legal instruments. The document does not fully explore whether this fragmented approach may create uncertainty in liability claims related to construction defects.
Another major area of concern is the provisions on contract termination (Articles 476-478). While the law outlines clear grounds for termination, including breach, impossibility of performance, and employer discretion, the document does not analyze the potential consequences of these provisions. For instance, if an employer can terminate a contract without providing adequate compensation, contractors may face significant financial losses. This raises concerns about contractor protections, particularly for foreign firms operating in Saudi Arabia who may not be familiar with local dispute resolution mechanisms.
Overall, while the Muqawala provisions in the Civil Transactions Law represent a significant step toward creating a modern, structured, and investor-friendly legal environment, the document does not fully critique the practical challenges of implementation. Key issues such as risk allocation, contractor protections, subcontractor rights, and liability limitations require further legal and judicial clarity. As Saudi Arabia continues to develop its construction and infrastructure sectors, the success of these legal reforms will depend on how effectively they are interpreted and enforced in real-world contract disputes.
TERMINATION OF CONTRACTS
The document focus on the termination of contracts under the Saudi Civil Transactions Law, outlining four statutory grounds for termination: mutual agreement, unilateral withdrawal, breach of contractual obligation, and impossibility of performance. The codification of termination provisions represents a significant step toward enhancing legal certainty and predictability in contractual relationships, particularly in commercial and business dealings. However, while these provisions align with regional civil codes, several critical issues arise concerning their practical implications, enforceability, and potential areas of legal uncertainty.
One of the most notable aspects of the law is its recognition of termination by mutual agreement under Article 105, which allows parties to dissolve a contract in whole or in part. This flexibility is beneficial as it enables businesses to adapt to changing circumstances without resorting to litigation. The document correctly highlights that similar provisions exist in other MENA jurisdictions, such as Egypt, the UAE, Jordan, Iraq, and Qatar, reinforcing the regional consistency of contract law principles. However, the analysis does not explore the practical challenges of partial contract termination, particularly in complex, multi-party agreements where the withdrawal of one obligation may have cascading effects on other contractual duties. The law’s silence on whether partial termination requires judicial approval or if it is enforceable purely through party agreement could lead to disputes regarding the extent and effect of the termination.
The second ground for termination, unilateral withdrawal (Article 106), allows a party to withdraw from a contract within a specified period if such a right is included in the agreement. This provision is particularly relevant in commercial transactions where parties may negotiate "cooling-off" periods or exit clauses. However, the document does not sufficiently critique the potential risks associated with this provision, particularly concerning abuse by stronger contractual parties. In business-to-business (B2B) agreements, a more dominant party could insist on unilateral withdrawal rights without reciprocal protection for the weaker party. Moreover, the law grants courts discretion to determine a reasonable withdrawal period if the contract does not specify one, which, while useful in cases of ambiguity, introduces an element of judicial subjectivity that may lead to inconsistent rulings.
The third ground for termination, breach of contractual obligation (Articles 107 and 108), is a fundamental principle in contract law, allowing an aggrieved party to seek termination if the other party fails to fulfill its obligations. The document highlights the importance of proper notification to the breaching party, which aligns with international contract law principles. However, it does not fully analyze the potential complexities of proving breach and the adequacy of judicial enforcement mechanisms. In jurisdictions where contract enforcement is swift and predictable, breach-based termination is an effective remedy. However, in legal systems where court proceedings are slow, a party seeking termination may face long delays, during which they remain bound to an unworkable contract. The document could have examined whether the Saudi legal system has adequate mechanisms for expedited resolution of breach-based terminations, particularly in high-stakes commercial contracts.
One of the most impactful provisions discussed in the document is Article 108, which allows parties to include automatic termination clauses in contracts without requiring judicial intervention. This is a progressive feature that reduces legal uncertainty and aligns with business-friendly practices in other jurisdictions. However, the document does not explore whether Saudi courts will impose restrictions on such clauses, particularly in cases where one party invokes automatic termination abusively. In some jurisdictions, courts retain the authority to override unfair termination clauses that disproportionately harm one party. Without clear judicial guidelines, businesses in Saudi Arabia may face uncertainty regarding the enforceability of pre-agreed termination terms.
The final ground for termination, impossibility of performance (Article 110), is a crucial legal principle that allows contracts to be rescinded when obligations become unfeasible due to external circumstances. The document correctly highlights that this aligns with similar provisions in Egypt, Iraq, Jordan, Qatar, and the UAE, reinforcing its compatibility with regional legal frameworks. However, the discussion does not sufficiently address the challenges of defining and proving "impossibility", particularly in disputes where parties may disagree on whether an event truly makes performance unfeasible. The absence of a clear force majeure framework within this section of the law raises concerns about whether businesses can effectively terminate contracts due to economic downturns, supply chain disruptions, or other external shocks. A deeper analysis of how Saudi courts will interpret "impossibility" in commercial, employment, and construction contracts would have been valuable.
Another notable feature of Article 110 is its distinction between total and partial impossibility, where only the affected portion of an obligation is extinguished unless the court deems it significant enough to justify full termination. While this nuanced approach is beneficial, the document does not discuss how courts will evaluate partial impossibility in practice. For example, in large construction projects, delays in obtaining government permits might only impact a small portion of the contract but could jeopardize the entire project timeline. The document could have provided insights into whether parties will have the flexibility to argue that a "minor" impossibility still justifies full termination based on the broader impact on contractual performance.
The document concludes by emphasizing that legal certainty around termination enhances business confidence and contractual reliability, which is a strong and valid argument. However, it does not critically examine potential loopholes or ambiguities that could lead to litigation or misuse of termination rights. One key omission is the lack of discussion on termination-related compensation and damages, particularly in cases where termination results in financial losses for one party. In many jurisdictions, terminated contracts require compensation to restore the injured party to their pre-contractual position, but the document does not clarify whether the Saudi law includes similar safeguards.
Overall, the termination provisions in the Saudi Civil Transactions Law represent a positive step toward codifying clear exit mechanisms in contracts, reducing reliance on judicial discretion and aligning with international contract law standards. However, practical concerns remain, including the risk of abuse in unilateral withdrawal clauses, judicial subjectivity in breach-based terminations, and uncertainties in defining impossibility of performance. A more detailed analysis of how these provisions will be enforced in practice, particularly in large-scale commercial and infrastructure contracts, would have provided a more comprehensive evaluation of the law’s impact. As Saudi Arabia continues its legal modernization efforts, the success of these termination provisions will depend on judicial interpretation, enforcement efficiency, and businesses' ability to adapt to the new legal landscape.
IMPOSSIBILITY AND EXCEPTIONAL CIRCUMSTANCES
The document discuss two significant legal concepts under the KSA Civil Transactions Law: Impossibility of Performance (Article 110) and Exceptional Circumstances (Article 97). These provisions provide essential mechanisms for addressing contractual obligations when unforeseen events disrupt performance. The analysis below critically examines their scope, impact, and alignment with both regional and international legal frameworks.
1. Impossibility of Performance (Article 110)
Article 110 codifies the doctrine of impossibility, wherein a contract is automatically rescinded if fulfilling an obligation becomes impossible due to reasons beyond the debtor’s control. This approach ensures fairness by preventing a party from being held liable for obligations that have become objectively unachievable. The provision also accounts for partial impossibility, ensuring that only the affected portion of the contract is terminated while the remainder may still be enforceable. However, it grants the court discretion to determine whether a partial impossibility warrants full contract rescission.
This provision aligns with similar doctrines in Middle Eastern jurisdictions such as Egypt (Article 159), Iraq (Article 127), Jordan (Article 247), Qatar (Article 171(2)), and the UAE (Article 273), reinforcing the KSA’s move towards legal standardization in the region. However, it differs from common law jurisdictions, particularly the UK doctrine of frustration, which does not automatically rescind the contract but instead renders it void from the point of frustration. This distinction could have practical implications for international businesses operating in KSA, as automatic rescission may lead to uncertainty regarding post-termination liabilities and compensation.
While Article 110 provides clarity on the termination of obligations, it does not extensively address the allocation of losses or whether the affected party can seek compensation for damages caused by the impossibility. In comparison, the UAE Civil Code (Article 287) explicitly states that a party cannot be held liable for damages resulting from events beyond their control. The absence of such an explicit provision in the KSA law may lead to judicial discretion in compensatory matters, potentially resulting in uncertainty and inconsistent court rulings.
2. Exceptional Circumstances (Article 97)
Article 97 deals with cases where contractual performance, while not impossible, becomes excessively onerous due to unforeseen exceptional circumstances. In such cases, courts are empowered to adjust contractual obligations to mitigate excessive hardship rather than terminate the contract outright. This principle is essential in preserving contractual relationships and ensuring economic fairness between parties. Unlike Article 110, which triggers contract rescission, Article 97 allows for modification, demonstrating a flexible and pragmatic approach.
The provision draws parallels with similar regional laws, such as Article 147 of the Egyptian Civil Code, Article 171 of the Qatari Civil Code, and Article 249 of the UAE Civil Code, all of which provide for judicial intervention when unexpected circumstances render a contract unduly burdensome. However, the KSA Civil Transactions Law introduces an additional procedural step requiring parties to first attempt renegotiation before seeking court intervention. This reinforces the principle of good faith negotiations and reduces unnecessary litigation, which is a progressive and efficiency-driven measure not explicitly found in comparable civil codes in the region.
However, the vague wording of “exceptional circumstances” leaves room for broad judicial discretion, which could lead to inconsistent rulings. Unlike the French concept of imprévision, which is limited to cases of radical contractual imbalance, the KSA provision does not clearly define the threshold for an obligation to be considered “exorbitantly burdensome.” This may result in uncertainty for businesses and foreign investors, who may find it difficult to predict judicial outcomes in the event of economic instability or market fluctuations.
3. Comparative and Practical Implications
Both provisions contribute to a more structured and predictable business environment in KSA, aligning with Vision 2030’s goal of enhancing legal certainty. However, their practical application depends on judicial interpretation and enforcement consistency. While the requirement for pre-court renegotiation in Article 97 is commendable, it could also prolong disputes if parties exploit it as a delay tactic.
For international investors, the automatic rescission under Article 110 might raise concerns about contractual continuity in long-term projects, especially in industries like construction and energy, where force majeure clauses are critical. The absence of a clear compensation mechanism may also deter businesses from engaging in high-risk contracts in Saudi Arabia, unlike in jurisdictions like the UAE, where compensation rules for impossibility are more explicit.
Overall, while Article 110 provides a strict but clear approach to contract termination, and Article 97 takes a progressive stance on hardship, further judicial guidance or regulatory clarification may be necessary to ensure their consistent and predictable application in commercial contracts.
REMEDIES
The document address remedies for damages under the KSA Civil Transactions Law, focusing on compensation principles, scope of damages, and methods of compensation. These provisions mark a significant shift towards a structured and predictable compensation framework in Saudi law, aligning it with modern civil law jurisdictions while maintaining elements rooted in Sharia principles.
1. Full and Complete Compensation (Articles 136 & 137)
The principle of full compensation is firmly established in Article 136, ensuring that a harmed party is restored to their original state before the damage occurred. This aligns with civil law traditions, such as those in Egypt and the UAE, where damages are meant to fully indemnify the injured party. However, unlike common law jurisdictions such as the UK, which distinguish between expectation and reliance damages, the KSA law adopts a broad compensatory approach.
Article 137 expands on this by explicitly allowing compensation for both actual losses and loss of profits, provided that the loss is a direct and natural consequence of the harmful act. This represents a major shift in Saudi law, as previously, compensation for lost profits was not commonly awarded. The requirement of foreseeability mirrors the approach taken in French and Egyptian civil codes, ensuring that damages awarded are not speculative but reasonably anticipated at the time of contracting. However, the law does not clarify whether consequential damages are recoverable, potentially leaving room for judicial discretion and inconsistency in awards.
2. Moral and Non-Material Damages (Article 138)
A significant evolution in Saudi compensation law is the inclusion of moral damages in Article 138. Historically, under Sharia law, damages were primarily limited to tangible harm (physical injury or financial loss), and compensation for non-material harm such as reputational damage or emotional distress was rarely awarded. The explicit recognition of moral damage compensation brings the KSA closer to civil law jurisdictions like France, Egypt, and the UAE, where such damages are well established.
However, the provision remains somewhat restrictive, as compensation for moral damages cannot be inherited unless settled before the injured party’s death. This limits the rights of heirs and prevents claims from extending beyond the victim’s lifetime, unlike in Western jurisdictions, where claims for pain and suffering can be pursued by the deceased’s estate. The restriction ensures that moral damages remain personal in nature, in line with Islamic legal principles, but may disadvantage families of victims in wrongful death cases.
3. Personal Injury and Sharia-Based Compensation (Article 142)
Article 142 reinforces Sharia principles by tying compensation for personal injury to Islamic blood money (diyah). This maintains continuity with existing Saudi legal practices and ensures alignment with Islamic jurisprudence, which has historically governed personal injury compensation. Unlike Western compensation models, which calculate damages based on economic loss and pain and suffering, the Sharia-based approach provides fixed compensation amounts, leading to predictability but less flexibility.
This rigid approach may pose challenges for foreign investors or expatriates, as compensation under diyah is generally capped at predetermined values rather than reflecting actual economic loss. In contrast, UAE and Egyptian laws offer more flexibility in calculating damages, potentially making them more attractive to businesses concerned about workplace liability risks.
4. Compensation for Non-Performance of Obligations (Article 170)
The KSA Civil Transactions Law adopts a flexible approach to contractual breaches by allowing compensation in lieu of specific performance if an obligation becomes impossible to fulfill. This aligns with civil law systems, where non-performance generally entitles the injured party to monetary compensation. The provision ensures contractual stability but leaves open questions regarding the enforceability of penalty clauses and liquidated damages.
The law does not explicitly state whether courts have discretion to adjust predetermined contractual damages, a power commonly exercised in French and Egyptian law to prevent unfair penalties. While Sharia principles discourage excessive penalties, the lack of clarity in the KSA Civil Transactions Law could lead to uncertainty in commercial contracts, particularly for foreign investors accustomed to clearer guidelines on liquidated damages.
5. Methods of Compensation (Articles 139-141)
While monetary compensation is the default remedy, Article 139 allows courts to order alternative remedies such as reinstating the pre-harm condition or imposing specific actions to correct the harm. This expands judicial discretion, offering more tailored remedies beyond financial compensation. However, the law does not specify the criteria for choosing non-monetary remedies, leaving it open to broad judicial interpretation.
Article 140 introduces the concept of significant damage, granting claimants the right to either retain a damaged property or force its return to the responsible party. This provision balances the interests of both parties, ensuring that an injured party is not left holding a devalued asset. However, the law does not clarify how courts should assess the value of damaged property, which may lead to inconsistent rulings.
Article 141 introduces preliminary assessments of compensation, allowing courts to revise and adjust awards over time. This is a progressive feature that ensures compensation remains fair and accurate, particularly in cases where damages are not immediately quantifiable. However, the law does not establish clear limitations on when or how these assessments can be revised, which could lead to prolonged litigation and uncertainty for businesses.
6. Adjustment of Contractual Compensation (Article 179)
Article 179 empowers courts to modify pre-agreed contractual damages, reducing them if they are deemed excessive or increasing them if actual losses exceed the agreed amount. This introduces a judicial safeguard against unfair penalty clauses, aligning the KSA with jurisdictions like the UAE, Egypt, and France, where courts have similar powers. However, the law does not define what constitutes “excessive” compensation, leaving room for subjective interpretation.
This could have practical implications for commercial contracts, as parties may now face uncertainty regarding the enforceability of liquidated damages clauses. Businesses operating in Saudi Arabia may need to reassess their contract drafting strategies, ensuring that penalty clauses are proportionate and justifiable.
Conclusion
The remedies for damages outlined in KSA Civil Transactions Law represent a significant modernization of Saudi compensation law, incorporating civil law principles while maintaining Sharia-based foundations. The inclusion of moral damages, lost profits, and judicial flexibility marks a departure from traditional Saudi legal practices, aligning the Kingdom with regional and international standards.
However, certain ambiguities remain, particularly regarding consequential damages, contractual penalties, and judicial discretion in modifying compensation. These gaps could lead to inconsistent application of the law, particularly in commercial disputes. Foreign businesses operating in KSA will need to carefully assess contractual risk under the new law, ensuring that damage clauses are clearly drafted and justifiable to withstand judicial scrutiny.
Overall, the reforms bring greater predictability and legal certainty, making Saudi Arabia a more attractive jurisdiction for investors and commercial entities. However, further judicial guidance and case law development will be necessary to ensure the consistent and fair application of these principles across various sectors.
LIMITATION PERIODS
The document focus on limitation periods under the KSA Civil Transactions Law. The codification of prescription periods (time limits for bringing legal claims) represents a significant development in Saudi Arabia’s legal framework, particularly as Sharia law traditionally does not recognize time bars for enforcing rights. By introducing specific limitation periods for civil claims, the law aims to enhance legal certainty and efficiency in dispute resolution. However, while the structured approach aligns with modern civil law systems, certain aspects—such as the calculation method, exceptions, and judicial discretion—may lead to practical challenges in enforcement.
1. General Limitation Periods (Article 295)
The law establishes a general limitation period of ten years for most civil claims, calculated from the date when the right falls due. However, unlike some jurisdictions where limitation periods automatically apply, the KSA Civil Transactions Law requires the defendant to invoke the limitation defense for it to be effective. This means that if a defendant fails to raise the issue, the court may still hear the claim. While this approach preserves Sharia principles, which emphasize that rights should not be extinguished by time, it introduces a level of unpredictability, as the enforceability of time bars depends on the actions of the defendant rather than an absolute legal rule.
By contrast, civil codes in Egypt, the UAE, and France impose automatic prescription periods, preventing courts from hearing claims beyond the specified timeframes unless special exceptions apply. The Saudi approach gives courts greater flexibility but may also lead to prolonged disputes and inconsistent applications, particularly if defendants fail to assert their right to dismiss time-barred claims.
2. Limitation Period for Tort Claims (Article 143(1))
The law provides a three-year limitation period for tort claims, starting from the date when the injured party becomes aware of both the damage and the identity of the responsible party. This is a progressive approach, as it ensures that victims are not unfairly barred from seeking compensation simply because the harm was not immediately apparent.
However, a ten-year absolute cutoff period applies from the date of the damage’s occurrence, meaning that even if a victim discovers the harm later, they cannot bring a claim beyond this period. This strikes a balance between protecting defendants from indefinite liability and ensuring that claimants have reasonable time to file cases.
A notable exception is made for tort claims linked to criminal offenses—if the criminal case is still viable, the civil claim remains valid. This follows the approach of many civil law jurisdictions, such as France and Egypt, where criminal liability extends the timeframe for civil compensation claims. However, unlike common law systems such as the UK, which allow courts to extend limitation periods in cases of fraud or concealment, the Saudi law does not specify whether courts have discretion to extend the timeframe in exceptional cases. This could create rigid outcomes in complex tort cases, particularly those involving latent defects or environmental damage.
3. Limitation Periods for Warranty Claims (Article 344)
For claims based on defects in sales contracts, the law imposes a 180-day limitation period from the date of delivery, unless the parties agree otherwise. However, an important exception exists—if the seller fraudulently concealed a defect, they cannot rely on the limitation period as a defense. This provision aligns with good faith principles seen in French, Egyptian, and UAE law, where sellers cannot escape liability through deceit.
The 180-day timeframe is relatively short compared to international standards—for example, the UK Sale of Goods Act provides up to six years to bring defect claims. The short limitation period in Saudi law may favor businesses and manufacturers, as it limits their long-term liability for product defects, but it may disadvantage consumers and buyers, particularly in cases where defects only become apparent after extended use.
4. Shortened Limitation Periods for Professionals and Recurring Payments (Article 296)
The law introduces a five-year limitation period for claims against professionals, including doctors, lawyers, and engineers, as well as for claims related to recurring payments such as rent, wages, and service fees. This timeframe is consistent with international norms, as many jurisdictions impose shorter limitation periods for professional malpractice claims, recognizing the need for finality in professional services.
However, the law does not clarify whether the five-year period applies to medical malpractice cases involving long-term consequences, such as birth injuries or chronic diseases. In contrast, jurisdictions like the UK and US allow exceptions for medical negligence claims, permitting victims to file claims beyond the standard timeframe if the harm was not immediately discoverable. The lack of explicit discovery-based extensions in the KSA law may disadvantage patients and clients in professional negligence cases.
5. One-Year Limitation for Commercial and Labor Claims (Article 297)
The law establishes a one-year limitation period for certain business-related claims, including:
The one-year limit for wage claims reflects a policy of ensuring labor disputes are resolved quickly, which is beneficial for both employees and employers. However, it may pose challenges for foreign workers, who may struggle to initiate claims within such a short window. By contrast, some Gulf Cooperation Council (GCC) countries, such as the UAE, allow up to two years for labor claims.
Additionally, the law does not specify whether the one-year period applies to wage claims involving unpaid bonuses, overtime, or end-of-service benefits, potentially leading to uncertainty for employees and HR departments.
6. Limitation Period for Sale Contract Disputes (Article 323(2))
A one-year limitation period applies to claims for terminating a sale contract, reducing the price, or completing payments. This provision ensures rapid resolution of commercial disputes, reducing the risk of long-term uncertainty over sales transactions. However, the law does not address whether force majeure events (e.g., supply chain disruptions or economic crises) can extend this period, potentially leading to rigid enforcement in unforeseen circumstances.
7. Interruption and Suspension of Limitation Periods (Articles 299-305)
Unlike common law jurisdictions, where limitation periods can often be paused (tolled) due to exceptional circumstances, the KSA Civil Transactions Law does not provide broad discretionary powers to courts to extend deadlines. However, certain interruption events are recognized, including:
While these exceptions provide some flexibility, the law strictly prohibits agreements to shorten or extend limitation periods (Article 305). This could disadvantage parties seeking customized contract terms, particularly in long-term commercial agreements where flexibility is essential.
Conclusion
The codification of limitation periods under the KSA Civil Transactions Law represents a significant legal reform, enhancing legal certainty and efficiency in dispute resolution. By establishing clear timeframes for civil, commercial, and labor claims, the law promotes stability and predictability in business and legal affairs.
However, certain aspects may pose challenges, including:
Overall, while the structured framework aligns Saudi Arabia with regional and international best practices, further judicial interpretation and legislative refinements may be needed to ensure fair and consistent application, particularly in complex commercial and tort disputes.
TRANSFER OF RIGHTS AND OBLIGATIONS
KSA Civil Transactions Law document focus on the transfer of rights and obligations, specifically addressing assignment of rights (Hawalat Al-Haq), transfer of debt (Hawalat Al-Dain), and contract novation (Al-Tanazul An Al-Aqd). These provisions introduce structured legal mechanisms for businesses and individuals to reallocate rights and responsibilities, improving contractual flexibility while maintaining certainty and enforceability. However, while the law aligns with international best practices, certain ambiguities and limitations may create challenges in commercial transactions.
1. Assignment of Rights (Hawalat Al-Haq) – Enhancing Liquidity and Financial Flexibility
The assignment of rights allows a creditor to transfer their right to claim a debt or benefit from an obligation to a third party without requiring the debtor’s consent. This is a significant departure from traditional Saudi legal practices, which were primarily Sharia-based and required mutual consent for contractual modifications. By enabling unilateral assignments, the law facilitates financial transactions such as factoring, securitization, and receivables financing, which are essential for modern commercial activity.
However, while debtor consent is not required, the law mandates simple notification to the debtor for the assignment to be effective. This strikes a balance between creditor flexibility and debtor protection, preventing unexpected third-party claims. Nevertheless, the law does not specify the consequences of failing to notify the debtor—whether this affects enforceability or merely delays payment obligations. This lack of clarity could lead to disputes, particularly in cross-border transactions, where differing notification standards may apply.
Furthermore, the automatic transfer of securities and guarantees associated with the assigned right ensures that the assignee enjoys the same level of protection as the original creditor. However, the law does not explicitly address whether defenses available to the debtor against the original creditor (e.g., claims of non-performance) remain valid against the new assignee. This omission could create uncertainty in financial transactions, as debtors might find themselves unable to raise legitimate defenses against the new creditor.
2. Transfer of Debt (Hawalat Al-Dain) – A Limited Approach to Debt Reallocation
The transfer of debt mechanism allows a debtor to transfer their obligation to another party, but only with the creditor’s consent. This requirement ensures that creditors retain control over who is responsible for repaying their debt, reducing the risk of weaker debtors replacing stronger ones. However, while this approach protects creditors, it limits the debtor’s flexibility in restructuring financial obligations, particularly in corporate reorganizations or insolvency scenarios, where automatic debt transfers could facilitate business continuity.
The law also ensures that associated securities (such as guarantees) transfer along with the debt, preserving the creditor’s position. However, it does not clarify whether a creditor can refuse consent unreasonably, which could lead to strategic refusals that hinder legitimate debt transfers. In jurisdictions such as the UK and UAE, courts can intervene if a creditor unreasonably withholds consent, a safeguard that appears to be missing from the KSA Civil Transactions Law.
Another limitation is that the law does not explicitly address whether creditors can impose additional conditions on debt transfers. In international commercial practice, creditors often require collateral, higher interest rates, or guarantees when approving a debt transfer. The absence of guidance on conditional approvals could lead to legal uncertainties, particularly in large-scale financing deals.
3. Contract Novation (Al-Tanazul An Al-Aqd) – Facilitating Business Continuity
Contract novation involves transferring an entire contractual position (both rights and obligations) to a third party. Unlike assignment, which only transfers rights, novation requires the consent of all three parties—the original parties to the contract and the new incoming party. This mechanism is crucial for corporate transactions, mergers, and acquisitions, where businesses often need to transfer ongoing contracts to new entities.
The requirement for all-party consent aligns with global best practices, ensuring that the original counterparty has the opportunity to assess the new contracting party’s financial standing and ability to perform. However, the law does not specify whether consent can be implied—for instance, if a party continues performing under a novated contract without formal written approval. This could create practical difficulties in enforcing contract transfers, particularly in long-term contracts where changes in parties are common.
Moreover, the law ensures that all securities, guarantees, and obligations transfer seamlessly with the novation, preventing contractual gaps. However, it does not address whether guarantees provided by third parties (such as corporate parent guarantees) remain valid after novation. In many jurisdictions, a guarantor must explicitly reaffirm their obligation after novation, but the KSA law remains silent on this point, which could create enforcement challenges.
4. Regional Context and Comparisons
The assignment and transfer provisions in the KSA Civil Transactions Law closely mirror similar legal frameworks in the UAE, Egypt, and Qatar, where these mechanisms have long been codified. However, some key differences exist:
Despite these regional similarities, the KSA law still retains flexibility in structuring contractual relationships, which is an important step toward modernizing the Kingdom’s business environment.
5. Practical and Commercial Implications
From a business perspective, the introduction of formalized assignment, debt transfer, and novation mechanisms is a major advancement for Saudi Arabia, particularly in facilitating:
However, some practical challenges remain:
For foreign investors, these uncertainties may require additional contractual safeguards, such as explicit warranties and indemnities in commercial agreements to mitigate potential risks.
Conclusion
The provisions on assignment of rights, transfer of debt, and contract novation mark a significant modernization of Saudi Arabia’s legal framework, aligning it with regional and global standards. By enabling greater contractual flexibility, these mechanisms will enhance commercial transactions, particularly in finance, corporate restructuring, and mergers.
However, ambiguities remain, particularly regarding debtor defenses, creditor consent limitations, and judicial oversight. To fully realize the benefits of these provisions, further legislative refinements or judicial clarifications may be necessary. Businesses operating in Saudi Arabia should carefully structure contractual agreements to address these potential gaps, ensuring that assignment, debt transfers, and novations are effectively managed within the evolving legal landscape of the Kingdom.
LEASES
The document discuss lease agreements under the KSA Civil Transactions Law, covering the establishment of leases, rights and obligations of landlords and tenants, and remedies for non-compliance. The codification of lease provisions provides greater clarity and predictability in Saudi Arabia’s real estate market, aligning with international best practices while maintaining elements of Sharia principles. However, some provisions lack specificity, which may lead to uncertainties in enforcement and tenant-landlord relations.
1. Establishment of Leases – A Defined Framework for Contractual Stability
Article 407 defines a lease as an agreement where the landlord grants the tenant the right to use a non-depreciable asset for a specified period in exchange for rent. The law allows leases to be formed over future periods (reversionary leases), which is an advanced legal concept uncommon in the region. This provision could increase investor confidence by allowing landlords to secure future rental income, while giving tenants certainty over future occupancy.
However, the law does not specify whether lease agreements must be registered with a government authority for enforceability. Many jurisdictions, including the UAE and Qatar, require mandatory lease registration to prevent disputes over property rights. The absence of a clear registration requirement in the KSA law may lead to ambiguities in enforcement, particularly in cases of unauthorized subleasing or overlapping lease agreements.
Another key issue is the undefined scope of leased assets. While the law mentions property, benefits, and rights, it does not clarify whether it applies to commercial leases, residential tenancies, or specialized properties (e.g., industrial zones, agricultural land, or built-to-suit leases). A lack of categorization could result in conflicting judicial interpretations, as different lease types often require distinct legal treatments.
2. Landlord’s Obligations – Ensuring Tenant Protection
The law imposes several obligations on landlords, including:
The landlord’s obligation to maintain the property is a crucial protection for tenants, ensuring that leased premises remain habitable and functional. However, the law does not clarify the scope of necessary repairs—whether it includes major structural repairs, routine maintenance, or emergency fixes. This could lead to disputes over cost-sharing responsibilities, particularly in commercial leases, where landlords often pass on maintenance costs to tenants through service charges.
Another significant provision is Article 420, which states that if the leased property is completely destroyed, the lease is automatically rescinded. However, the law is silent on partial destruction, leaving ambiguity on whether the tenant has a right to partial rent reduction or lease renegotiation. In contrast, civil codes in Egypt, Jordan, and the UAE explicitly provide for rent reductions in cases of partial property damage. The lack of clarity in KSA law may lead to inconsistent court rulings, particularly in force majeure situations such as natural disasters or unforeseen regulatory changes.
Additionally, the law allows landlords to terminate the lease if the tenant breaches contractual terms, but it does not specify procedural requirements for eviction. In jurisdictions such as Dubai, landlords must provide formal eviction notices and follow specific legal procedures, ensuring tenant protections against arbitrary terminations. The absence of eviction procedures in the KSA law creates potential uncertainty, particularly for long-term tenants with significant business operations or personal investments in the leased property.
3. Tenant’s Obligations – Defining Responsibilities but Leaving Open Questions
The law sets forth standard tenant obligations, including:
One notable provision is Article 432, which prohibits tenants from making unauthorized modifications to the property. This aligns with international lease practices, ensuring that landlords retain control over structural changes. However, the law does not clarify whether tenants can make minor alterations (e.g., interior design changes or minor renovations), which could create practical disputes, particularly in commercial leases where fit-out works are common.
Another potential issue is the obligation for tenants to continue paying rent even when repairs or disturbances occur. While tenants can seek lease termination or rent reductions for major disturbances (Articles 424-428), the law does not specify the process for obtaining such relief. In jurisdictions such as the UAE and France, tenants can apply to rental dispute committees or courts to seek immediate rent reductions in cases of habitability issues. The lack of a streamlined dispute resolution process in the KSA law could result in longer litigation times and uncertainty for tenants.
A positive feature is Article 441, which ensures that leases do not automatically terminate upon the death of the tenant. However, heirs may request termination if they prove that the lease obligations are too burdensome. This provision aligns with Egyptian and UAE laws, providing fair relief for surviving family members while ensuring that landlords are not left with unpaid rent.
4. Restrictions on Subleasing and Lease Assignments – A Control-Oriented Approach
The law prohibits tenants from subleasing or assigning leases without the landlord’s consent (Article 437). While this protects landlords from unauthorized third-party occupancy, it may also limit business flexibility, particularly for commercial tenants who may wish to transfer their leases as part of business sales or mergers. In the UK and UAE, commercial leases often include standardized assignment clauses, allowing tenants to transfer leases subject to reasonable landlord approval. The strict prohibition on subleasing and assignments in KSA law could discourage foreign businesses from entering long-term leases, as they may lack exit strategies if business conditions change.
5. Termination and Lease Expiry – Addressing Continuity but Missing Dispute Resolution Mechanisms
The law provides that leases expire upon the agreed term (Article 440), but if the tenant continues occupying the property after expiration, the lease terms remain in effect. This prevents legal uncertainty over holdover tenancies, ensuring that rent and obligations remain enforceable until a new agreement is reached or the tenant vacates.
However, the law does not provide clear guidelines on rental increases for holdover tenancies, leaving the risk of rent disputes. In Dubai, Qatar, and Egypt, rental dispute centers regulate fair rent increases, preventing landlords from exploiting tenants in holdover situations. The absence of similar protections in KSA law could lead to unfair rent hikes, particularly in high-demand areas.
Another critical issue is the lack of a dedicated rental dispute resolution body. While disputes will likely fall under Saudi commercial or civil courts, the absence of a specialized mechanism may result in delays in resolving lease disputes, particularly for short-term residential leases, where rapid decisions are essential. In Dubai and Abu Dhabi, rental disputes are handled by dedicated committees that provide swift rulings—a model that Saudi Arabia could benefit from adopting.
Conclusion
The lease provisions in the KSA Civil Transactions Law mark a significant step toward modernizing real estate transactions, enhancing clarity and legal certainty for both landlords and tenants. By codifying key obligations, termination rights, and restrictions on modifications, the law improves predictability in lease enforcement.
However, several gaps remain, including:
While the overall framework aligns with regional and international best practices, further legislative refinements and judicial guidance will be needed to ensure fair and effective lease enforcement in Saudi Arabia’s rapidly growing real estate market.